1. Field of the Invention
This invention discloses a method and a computer system in combination with sensor technology located proximate to an insurable interest for transmitting, such as over the Internet, risk mitigation utilization data to a centralized database for analysis, publishing, underwriting, selling and managing insurance products.
2. Description of the Prior Art
A notable fact about insurance premiums is that they are billed in advance of the period of insurance during which the policy period runs. Insurance premiums are not set on the basis of the utilizing of technology, as viewed on a real time basis or by ascertaining the level of risk mitigation utilized during a particular period. If the degree of utilization and compliance regarding risk mitigation technology can be determined accurately, it provides for the option of setting premiums after a term during which the carrier has had an opportunity to measure compliance.
Underwriting is the process of establishing insurability and premium levels that will economically and profitably transfer risk from a policyholder to an insurance company.
In determining insurability and premium, insurance carriers take into account such factors as profit goals, competition, legal restrictions and the costs associated with losses (claims costs), loss adjustment expenses (claim settlements), operational expenses (commission and brokerage fees), general administrative expenses, and the cost of capital.
More particularly, an insurance carrier typically assesses a unit of exposure based on a premium, known and predicted exposure, and loss and expense experience. In this manner, carriers establish the basis of potential loss and the general direction of trends in insurance claim costs. The carrier establishes and subsequently adjusts premiums based upon the risks it underwrites. The premium is based upon damage to structures, vehicle accidents, human loss, as well as changes in claim costs, claim frequencies, loss exposures, expenses and premiums; the impact of catastrophes on the premium rates; the effect of salvage and subrogation, coinsurance, coverage limits, deductibles, coverage limitations or type of risks that may affect the frequency or severity of claims; changes in the underwriting process, claims handling, case reserves and marketing practices that affect the experience; impact of external influences on the future experience, including the judicial environment, regulatory and legislative changes, funds availability, and the modifications that reflect the impact of individual risk rating plans on the overall experience. However, notably absent from the factors customarily taken into account and one of the most profound influences in loss experience is the effect of technology. Therefore, an underwriting process that considers the continuing technology revolution would be anticipated to better assess loss ratios for insurable interests.
It is widely assumed that using various technologies may reduce the risks of loss associated with structures, vehicles and the cargo such vehicles carry. Consequently, state, local and national safety codes and regulations affecting such things as loads, use, performance and parameters (such as tire pressures), are constantly being revised to keep up with modern trends and technological advancements.
Beyond the requirements imposed through legal regulation, owners and those with insurable interests in structures and vehicles, may also employ systems that further militate against one or another loss or hazard. For well over a generation, the auto and trucking industry have mandated the use of seat belts and air bags to reduce injury losses from accidents. Many types of marine craft and aircraft have fire safety alarm and fire inhibitor systems that automatically trigger upon sensing a particular state of affairs, and thus minimizes fire damage and reduces human loss through early detection, central alarm, and appropriate response. Flame-retardant technology is widely employed in offices, homes, automobiles and trucks to reduce damage from fire. In some instances, one technology replaces another as to improve a condition that is inherently dangerous, but the replacement technology retains the fundamental objective of reducing damage. For example, asbestos has been virtually banned as a building material in favor of flame retarding products as a means for reducing fire hazards. As new hazards are discovered, newer technology will be incorporated to achieve the benefits of a safer society.
From a baseline related to minimum regulation and code requirements, underwriters of property casualty insurance factor into the risk/loss proposition items that relate to the structures, vehicles and cargos to be insured, (such as, the year of construction, type of construction, and its use. For cars, trucks and aircraft: miles traveled per year, geographic scope, the property's physical address, the existence of safety devices, such as air bags, seat belts, fire apparatuses, its current market and replacement value may be deemed pertinent. Underwriters also take into account items not directly related to the physical properties of the insurable interest, but that have been statistically shown to correlate with risk/loss as by way of example, the insured's credit rating, business industry codes, age of the structure or vehicle, owner's age and record of insurance claims, and the insured's driving record.
Contemporary underwriting practice is typically reduced to a binary choice to issue or not to issue a policy of insurance based upon the aggregate of statistically relevant underwriting criteria, rather than producing insurance products tailored to combinations of risk reduction technology. As such, the benefits of a class of technology may not be adequately considered during the underwriting process. Significantly, the ranges of efficacies associated with specific technologies within a class of technologies are ignored as salient facts. However, various classification schemes may be utilized to form associations that may represent a logical, qualitative, comparative or quantitative evaluation (collectively hereinafter referred to as a “difference”) which difference may be assigned a weight typically referred to as a weighted difference, between the an unmitigated risk, and field a mollified risk.
A prime example might be an underwriting practice that does not factor in the functional details of available technology, such as by way of example: type of vehicle braking system or the corresponding brake performance, tire pressure, average accelerations and speeds, air bag detectors, fire detectors, and intrusion systems. For structures and cargos, such incidents as: radiation, chemical or biological hazards (such as the detection of explosive devices, illegal drugs or disease producing agents) may not be adequately assessed because no means exist by which such incidents can feasibly be reported.
Also, the current insurance underwriting practice does not factor in details on various actively responsive technologies that are currently available such as by way of example, the type (i.e. specific functionality) of the presence of chemical release systems to extinguish fires generally, gasoline fires in vehicles particularly, or products that automatically communicate medical emergencies from homes or vehicles.
In regards to vehicles, products as familiar as the common auto theft alarm system, fog lamps, air bags, blow out proof tires and anti skid braking and all wheel power systems, are available to consumers. Importantly, the current insurance underwriting practice does not factor in or discriminate between extant technology and actual, continuous functionality (monitoring) of relevant technology designed to reduce damage and insurance risks.
Stationary structures, such as buildings (e.g., commercial and residential), utilities (e.g., dams, bridges, power grids) and transports (e.g., automobiles, trucks and construction machinery, aircraft, and marine vessels, collectively, referred to as “vehicles”), as well as warehoused goods and cargo (collectively, “goods”) do not typically incorporate devices, such a sensors that measure and transmit risk factors that may be useful to insurance underwriters. Such risk factors typically would concern the status of a building's existing fire apparatus, a vehicle's safety features or the manner in which a vehicle were operated. Such operating details may serve as important diagnostic markers relative to potential insurance loss. Little exists in the prior art that provides real time access to data regarding structures, vehicles or goods and to ascertain precisely what contributes to, safety hazards, safety violations, accidents and other property and casualty loses.
In the future a wide variety of products will employ diagnostic tools, measurement devices, detectors and sensors (collectively, “sensors”) to ascertain the potential for risk and consequent loss, and whether such systems can arrest or ameliorate hazards to building structures, vehicles and goods, in addition to personal safety. Knowledge and the corresponding use of theses kinds of devices will lead to a safer environment and less expensive insurance premiums. To adequately and reliability factor in these advances into the insurance underwriting equation, a carrier must not only have information on the existence of the technology, but that the technology is properly installed and working.
Thousands of separate and distinct materials and products are employed in the use and construction of building structures and vehicles. Large numbers of these products have a significant impact upon personal safety and the ability of the insured interest to withstand catastrophic events. Architects, design and safety engineers and vehicle owners have considerable opportunity to chose among diverse products that might for purposes of discussion be separated into categories such as engineering materials, sensor technologies and responder technologies. An exhaustive list of products from these categories, relevant to loss prevention and mitigation could reasonably be expected to run into the millions of combination (e.g. more than 100 different materials times, 100 different sensor technologies times 100 different responder technologies). Various specific combinations may have corresponding efficacies with regard to the amelioration of loss. In each instance, the consumer would anticipate a corresponding premium to reflect the expected loss ratios attendant to using a particular product or combination of products (and might be influenced to make more economically sound judgments in incorporating materials/technologies that reduce damage/risk, if the benefit of such choices could be clearly articulated in costs savings from reduced premiums over the life of the material/technology in question).
However, as indicated, the insurance industry generally does not factor into its underwriting rules the reduction in risk with sufficient specificity to affect premiums or expand coverage that can be underwritten within acceptable loss premium ratios (either by increasing specificity as to exclusions, qualifying risk allocation based upon risk reduction technology or providing extended coverage under excess premium conditions).
Related to the problem of adequately accounting for working technology, the industry does not publish or otherwise make available to the consumer sufficient information on the underwriting process to allow the consumer to make informed choices on products and technology that may result in costs savings, both to the consumer and the carrier. In as much as classical underwriting depends to a large degree on statistics surrounding conditions relevant to loss, the difficulty in utilizing technologic innovation in the actuarial computations has to do with the small sample sizes and/or lack of data on the effect of a particular technology.
As apparent, the salient combination of technologies utilized in a structure or vehicle is typically vast, and searching for specific combinations and relating them to loss ratio and premiums is a time-consuming process utilizing current information processing systems. Nonetheless, such data rich environments may feasibly be handled utilizing expert systems and neural networks. See, U.S. Pat. No. 5,696,907 and U.S. Pat. No. 5,893,072.